Marketplace Regulation Blacklist Overview

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Proposed revisions to a major social credit document impacting business have been released for public comment through August 10, 2019.

The revisions will update a 2016 document governing the administration of a marketplace blacklist for those with serious violations of law.

The Changes purport to improve:

  • Standards for inclusion on the list
  • Procedures for entry and removal
  • Proportionality of punishments
  • Credit restoration measures

They Measures also account for the recent merger of the the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), the China Food and Drug Administration (CFDA), and the State Administration of Industry and Commerce (SAIC) into a new agency, the State Administration for Market Regulation (SAMR).

Expanded Targets:

The previous version mentioned only ‘enterprises’, but the list will now also expressly include privately owned businesses, and other organizations; so that any social group engaging in market conduct might be listed.

Individuals in certain key positions with control over, or responsibility for, organizations’ actions have also been added, as well as those with direct responsibility for entities’ violations, and those directly participating in market conduct. Other industry-specific social credit blacklist schemes have also included individuals for their role in entity misconduct.

More Circumstances Covered

As with other social credit blacklists, only more serious violations under the authority of regulatory bodies are grounds for entry. In drafting the rules for this list, the State Administration for Market Regulation seems to consider societal impact, recidivism, aggravating consequences, and the sensitivity of the industry involved in designating ground for entry.

CLICK FOR OVERVIEW OF GROUNDS FOR ENTRY

The period for listing is generally 3 years, providing no further violations occur.

Where the grounds for listing is that the business has remained in the Irregular Business Directory for 3 years, they will be listed for 5 years.

Corrections

Chapter IV of the Measures (article 11-13) contain methods for administrative and judicial challenges to being listed in accordance with other laws on administrative decisions.

Objections are to be mad to the listing departments within 30 days of listing, with up to another month before removal occurs.

Articulation of Punishments

The rules lay out 10 types of punishments for listed entities, most of which are typical of those in other blacklist and joint-enforcement documents:

  1. Consideration in administrative permitting, registration, credentials, etc.
  2. Legal Representatives banned from serving as leader of another enterprise for 3 years, if enterprise was listed due to being in Irregular Business Directory for 3 years.
  3. Increase frequency of oversight inspections
  4. Increase punishments were the allows discretion
  5. Do not give honorific titles; revoke honorific titles already given
  6. Block enjoyment of beneficial policies
  7. must not act as a national standard drafting unit
  8. Must not be certified/authenticated. If requiring goods certification, not allowed to rely on self-declarations.
  9. Online transaction platforms are to alert users that a business has been listed, and not provide services to listed businesses.
  10. Legal representatives that are pharmacists are to have their registration revoked, and this is to be recorded in pharmacist management systems.

Credit Restoration

  • Credit Restoration, allowing for early removal from the blacklist is available after 1 year.
  • It requires that the listees stop the negative conduct and work to remove any negative impact.
  • Approval of Provincial-level market regulator is required, after review by lower departments.
  • Not Available where:
    • Endangered national security, public safety, people’s health and security in property.
    • Have previously failed to follow through on pledges made to obtain credit restoration
    • Have already begun liquidation and bankruptcy
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